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Longer term studies of mutual fund inflows, cash reserves, etc., can be found in the “Supply/Demand” section of this publication.

This publication has chosen not to employ this late 1996-early 1997 tactical trading strategy.

The NASDAQ Composite Index has become a very poor measure of smaller, more aggressive stocks. 

Sector employed in equity portfolio (Jan. 1997).

The tables on the next two pages are performance rundowns for The Leuthold Group's equity market sectors (and other measures) ranked by 1996 performance.

No fixed income changes planned for January.  Significant bond market weakness would be viewed as opportunity to accumulate (7% area).

Thanks to the quantitative disciplines (Sector Selection Scores), sector calls and shifts in equity portfolios were mostly on the mark in 1996...except for bad late 1995-1996 Playing The Bounce episode.

It’s “Never Never Land”...stock market now above all past valuation extremes. Ultimately, a big bear market is out there, but shorter term it may go higher.

Lou Harris recent poll indicates mutual fund investors’ expectations are unrealistically high and many would sell if market declines.

For the month of November, net inflows into U.S. focus funds are estimated at $14.4 billion, up 26% from $11.4 billion in October and above the $13.1 billion of November 1995.

Weighted S&P 500 outperforming unweighted counterpart. Typical NASDAQ stock up 6% year to date, compared to +23% for Index (10 biggest NASDAQ stocks up average of 45%).

Fresh tax bounce list. Slim pickings, only 28 qualifiers. Most distressed equities have already bounced too far off recent lows per our discipline (especially the technology issues).

Technology was a big winner in November, with 8 of the top 20 sectors being technology related.

Semiconductors being added to both portfolios in early December. Reasons for big jump in Semiconductors ranking are explained which should help readers better understand disciplines and factors in SS Scoring System.

Excerpts from Leo Melamed’s new book. Former Chairman of the "Merc” (home of S&P futures), gives insider view of 1987 stock market crash. Also, my first annual letter to mutual fund shareholders is reprinted here. You want to know what I really think about the stock market?...Here it is.

Bond rally has further to go in 1997 (6% or lower) if nervous equity investors seek safer havens, economy slows, and foreign appetite for U.S. Fixed Income remains. U.S. yields remain relatively high.

Boosting commitments in this sector by 5%. We expect lower interest rates over the next 6-12 months, and this sector should benefit.

Boosting commitments in Natural Gas by 3%. Sector has ranked in the Most Attractive category for seven straight months.

REITs continually ranked this year among Most Attractive. After tactical additions, 15% now invested in REITs. Interest in these real estate proxies is definitely increasing, by both institutional and individual investors.

A performance rundown for The Leuthold Group's equity market sectors (and other measures) ranked by October performance.